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Sweden Faces Major Funding Challenge in Defense Modernization

December 28, 2016 (Photo Credit: Soren Andersson/AFP via Getty Images)
HELSINKI — Sweden is facing a major challenge in how it will fund a huge future defense modernization bill, a situation compounded by serial underspending by various Swedish governments in defense budgets delivered since 2004.

The Swedish Armed Forces (SAF) hopes the government’s eventual capital investment plan will provide $34-44 billion in defense spending over the term of the next five-year Defense Policy Plan (DPP). This would amount to $7-9 billion a year, or substantially higher than the current level of annual budgetary spending.

The government has allocated $6.1 billion to the defense budget in 2016.

The SAF maintains that annual spending of up to $9 billion is a fundamental prerequisite if Sweden wants to meet its procurement targets and continue to build a credible military organization in the face of a less predictable Russia in the High North and Baltic Sea regions.  


To this end, the Social Democrat-led government has appointed Ingemar Wahlberg, a former permanent secretary of the parliamentary Committee on Defence, to the role of lead investigator to determine the level of capital financing Sweden ’s defense organization and connected modernization programs will need beyond 2020 when the present DPP expires.

Wahlberg's report, which is expected to be completed no later than the end of 2018, will have a pivotal impact on the spending framework within the government’s next DPP. This will cover defense budgetary spending from 2020-2025.

The government needs to take a closer look at how major acquisition programs for the Air Force, Navy and land forces will impact future organization costs and funding requirements, said Defence Minister Peter Hultqvist.

"These are very important issues for the Armed Forces and for the future of national defense. I do not remember a similar investigation like this one ever [being] conducted before. It’s very important that we resolve our equipment needs and examine all dimensions — including the cost of future systems investments and maintenance," Hultqvist said.


In its DPP covering 2016-2020, the government has pledged additional funding of $2.1 billion to shore up the country’s combat readiness and defense capabilities.

The DPP for 2020-2025 is intended to add momentum to force readiness and capabilities. This will largely come from new weapons systems acquisition programs that give the SAF greater defensive strength and a higher level of offensive firepower.

With Russia strengthening its military presence regionally, leading opposition parties, including the Centres and the Moderates, are urging Prime Minister Stefan Löfven’s government to inject a significant increase into defense spending.

A larger-than-standard segment of the investment program will be used to finance big-ticket procurement projects, including acquisition of additional Gripen fighter aircraft, a new submarine class, anti-submarine helicopters and the scaling up of Sweden’s underfunded air-defense systems.

Future decisions on long-term spending on defense will be weighted more on affordability rather than necessity, said Robert Devrindt, a Brussels-based political analyst.

"The maths are fairly simple here. If Sweden ’s annual spending on defense stays at the current level, and fails to rise to the $9 billion a year level that military chiefs want, then affordability becomes a critical factor. If funding falls short, the military may have no choice but to drop some key weapons acquisition programs, or find more cuts in the defense organization to pay for urgent capability-related acquisitions," Devrindt said.

The Swedish government accepts the military perspective that funding must markedly and rapidly increase, according to Member of the European Parliament Gunnar Hökmark, a member of Sweden's Moderate Party.

" Sweden needs to undertake a rapid strengthening of its defense capability with increased funding in the coming years. At the same time we need to recover from the negative effects of damaging defense policies since 2004, which stripped the military organization of the economic means to properly fulfill its tasks," Hökmark said.

The MEP wants the Swedish government to borrow up to $4 billion to ensure that the SAF has the means and purchasing capacity to continue with its force modernization programs.

According to Hökmark, a once-off loan would not affect the long-term expenditure framework for national defense. Moreover, it would enable the SAF to further militarize Gotland , Sweden ’s strategic island base in the Baltic Sea , he said.

A higher spending level would enable the SAF to pursue and complete critical acquisition programs to add weapons systems, such as Leopard tanks, more Gripen fighters, a superior submarine class and naval frigates.

The SAF’s shopping list for 2016-2025 includes armored fighting vehicles, armored transport vehicles, mortar and anti-aircraft systems, the modernization of the submarine fleet, acquisition of air-defense systems, upgrades to the Navy’s core surface fleet vessels, and acquisition of up to 10 additional Gripen-E aircraft.

The shopping list also includes the purchase of guided missiles, anti-submarine hunter helicopters, upgrades to radar stations, the replacement of ageing training aircraft, transport aircraft, warships, minesweepers and anti-ship missiles.

As a ratio, Swedish  military spending will amount to about 1.1 percent of gross domestic product in 2016. This contrasts with the 2.6 percent of GDP that Sweden spent in 1988. Its Nordic neighbors are spending a higher percentage of GDP:  Norway will spend 1.54 percent of its GDP on its defense organization in 2016; Finland will spend 1.37 percent; and Denmark 1.2 percent.

In terms of the GDP ratio, neutral Sweden ’s NATO-aligned Baltic neighbors are all currently out-spending Sweden . Estonia ’s defense spending will be equivalent to 2.16 percent of GDP in 2016, with Lithuania coming in at 1.49 percent and Latvia at 1.45 percent.
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